On December 31, 2010, the Williams Company had the following liabilities: Trade
ID: 2488244 • Letter: O
Question
On December 31, 2010, the Williams Company had the following liabilities:
Trade accounts payable
$140,000
11% note payable, maturing in equal installments of $30,000
per year on December 30 through 2013
90,000
12% note payable, issued October 15, 2010, maturing
February 15, 2011
70,000
On December 31, Williams signed a binding agreement with its bank to refinance the 12% note through February 14, 2013, at a variable interest rate.
What is the amount of Williams' current liabilities on December 31, 2010?
Trade accounts payable
$140,000
11% note payable, maturing in equal installments of $30,000
per year on December 30 through 2013
90,000
12% note payable, issued October 15, 2010, maturing
February 15, 2011
70,000
Explanation / Answer
Answer:
Amount of William's current Liabilty on December 31, 2010 = Accounts payable + Installments falling due in the next 1 year period after the balance sheet date.
= 140,000 + 30,000 = $170,000
Therefore, 12% note payable will be classified as long term debt :
1) as the company intends to refinance it and
2) Ability to refianance exist.
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